Log in
Finance
1
answer
0
watching
732
views

X Company is considering replacing one of its machines in order to save operating costs. Operating costs with the current machine are $61,000 per year; operating costs with the new machine are expected to be $47,000 per year. The new machine will cost $65,000 and will last for 5 years, at which time it can be sold for $1,000. The current machine will also last for 5 more years but will not be worth anything at that time. It cost $44,000 four years ago, but its current disposal value is only $4,000. Assuming a discount rate of 9%, what is the incremental net present value of replacing the current machine with the new machine?

Watch
1
answer
0
watching
732
views

For unlimited access to Homework Help, a Homework+ subscription is required.

Keith Leannon
Keith LeannonLv2
29 Sep 2019

Unlock all answers

Get 1 free homework help answer.
Already have an account? Log in
Share

Related questions

X Company is unhappy with a machine that they bought just a year ago for $45,000. It is considering replacing it with a new machine that will save significant operating costs. Operating costs with the current machine are $67,000 per year; operating costs with the new machine are expected to be $45,000 per year. Both machines will last for 6 more years.The current machine can be sold immediately for $7,000 but will have no salvage value at the end of 6 years. The new machine will cost $74,000 and have a salvage value of $1,500 in 6 years. Assuming a discount rate of 8%, what is the net present value of replacing the current machine?

Wilbur Corporation is considering replacing a machine. The replacement will cut operating expenses by $24,000 per year for each of the five years the new machine is expected to last. Although the old machine has a zero book value, it has a remaining useful life of five years. The depreciable value of the new machine is $72,000. Wilbur will depreciate the machine under MACRS using a 5-year recovery period and is subject to a 40% tax rate on ordinary income. Estimate the incremental operating cash flows attributable to the replacement. Be sure to consider the depreciation in year 6.

Your firm is considering whether to replace an existing machine with a new one. The existing machine was purchased five years ago for $200,000 and has an economic life of ten years, that is, it will last for another five years. It will have no salvage value. The operating costs for this machine are $25,000 per year. This machine can be sold today for $80,000. The new replacement machine will do exactly the same job as the existing machine. This machine costs $140,000 and has an economic life of five years and no salvage value. The operating costs for this machine are $17,000 per year. Your firm

Weekly leaderboard

Home
Homework Help 3,900,000
Finance 370,000
Start filling in the gaps now
Log in